Remaking U.S. Global Leadership in the Age of Technology Competition

A world in which the CCP and firms based in China produce, operate, and control key digital and emerging technologies used by individuals, businesses, and governments will become much less free and open. It puts at risk the security and integrity of the digital world, lowers the barriers to illiberal tech governance and standards,² and ultimately threatens the legitimate sovereignty of nations that rely on technology sourced from authoritarian nations. Instead of a world where nations can expect agreed-upon principles to guide the conduct of international relations, a world order shaped by the PRC’s tech sphere of influence would be subject to the whims of the PRC. The result is the single greatest challenge to open democratic societies and a wider world order anchored in the respect for the rule of law.

Yet for much of the world, technology developments are not perceived as part of a strategic contest, and many nations see little distinction between a U.S.-led or PRC-led global order. Their technology choices are made on the basis of national interests and economic calculations. This divergence is the crux of the foreign policy challenge. The United States and its allies will need to offer real technology alternatives to those from the PRC. They must also demonstrate that open societies and the technologies we develop offer greater promise for national success and prosperity than do closed systems and the technologies sourced from authoritarian nations. Doing so will restore faith in a rules-based order.

Transforming U.S. Foreign Policy for the Tech Competition

The United States has taken initial steps to meet the moment: reiterating its commitment to Internet freedom, funding digital freedom technologies,³ raising alarm bells about the threat of PRC technologies, promoting U.S. technology exports,⁴ and increasing outreach to partners to build resilient supply chains and coordinate technology policies.⁵ It is time to accelerate these actions to institutionalize the architecture for a long-term competition.

We identify four mid-decade objectives for foreign policy in the age of technology competition:

• Promote digital freedom in an ideologically pluralistic world as the counterweight to closed spheres of digital influence and control, particularly by investing in circumvention technologies that can pierce through firewalls and other forms of authoritarian control, developing a playbook to help manage authoritarian challenges, and supporting civil society globally.
• Build out resilient, secure, and open global digital infrastructure to help safeguard data and the next generation of apps and platforms that will drive national security, economic prosperity, and societal cohesion.
• Strengthen tech partnerships with the “swing states” – those nations that do not seek to be locked in to either U.S. or PRC technology or ideology – through capacity building and a compelling alliance package of financing, digital infrastructure, apps, and services that reinforces their resilience and sovereignty.
• Construct a new relationship with the PRC in a world where technology competition is driving increasing bifurcation and the United States and PRC clash across nearly all fronts.

We recommend three pillars to a U.S. foreign policy strategy to achieve these objectives:

• Establish alliance partnerships around technology that leverage allied comparative advantages to compete at scale, reinforce alliance resilience against the authoritarian system, and support enduring alliance technology advantages.
• Align private sector activity toward national strategic technology interests within appropriate democratic guardrails and coordinated governance/regulatory frameworks.
• Structure the United States’ foreign policy organizations, tools, and workforce to be better fit for tech competition.

The next section elaborates on these pillars and how the United States can leverage these ways and means to organize and lead in the tech competition, followed by discussion and recommendations for achieving the four mid-decade objectives for foreign policy.

Pillar 1: Alliance Resilience and Partnerships

Neither the United States nor any of its allies on their own can compete at scale with the PRC in the tech competition. The United States and its allies must move beyond coordination and toward institutionalizing alliance techno-industrial cooperation that capitalizes on the benefits of our alliance ecosystem, brings to bear our respective comparative advantages, builds out our collective resilience, and supports democratic leadership. The United States should undertake three priorities to orient our alliances for the tech competition:

• Globalize alliance coordination by leveling up regional alliance efforts. We need our alliances to take a global approach to the competition. The United States should leverage its leadership across the Quad, AUKUS, and the U.S.-EU Trade and Technology Council and bring together allies from across the Americas, Europe, and the Indo-Pacific into global partnership.
• Expand the definition of “winning” — a competition of systems is a team effort with our allies. Tensions among allies over commercial competition are not new — they are inherent in trade.⁶ However, there should be no question that the United States should prefer to see a company from an allied country win a contract or gain market share in strategic tech sectors where the leading companies may not be American (e.g. 5G networking) — and vice versa — rather than see a PRC company win that contract or gain market share. In areas where the PRC is competitive, the tech competition will require the United States and its allies to balance national commercial interests with alliance resilience, and prioritize commercial partnership over commercial competition.
• Integrate alliance capabilities and advantages to compete at scale for global markets and to mitigate alliance vulnerabilities. The PRC brings together “public” and “private” resources, capabilities, and national champions into a package of technology, infrastructure, services, and financing — all with official government backing.⁷ This is essentially a challenge of scale and scope. By working with allies to pool our official resources, the United States can align alliance investments and financing to begin to match the scale of resources the PRC can bring to bear. And by coordinating alliance tech priorities and the comparative advantages our companies have (e.g. one ally may have best-in-class cloud service companies, another may have best-in-class 5G networking), the United States and its allies can facilitate corporate partnerships, such as consortia, that can help deliver compelling global digital infrastructure and other technology solutions that no one nation could muster on its own. Relatedly, the United States and its allies can develop collective alliance resilience by looking first to other allies’ companies to fill gaps in capabilities and resources, and thereby mitigate risks of dependencies with the authoritarian system.

Energizing alliance cooperation in the tech competition could include:

• A small group on next-gen connectivity — United States, Japan, Republic of Korea, Sweden, Finland, EU, and others.⁸ Even as we work to catch up in the 5G competition, a small group of allies should organize to avoid the mistakes of the past and look over the horizon at next generation network solutions like 6G and space-based systems. The small group can work together to get a headstart on financing, R&D, patents, standards, and production.
• The “DemTech” Alliance. Aligning allies’ comparative advantages and coordinating complementary regulations, policies, and investments will also be needed — we can do so by building the DemTech alliance of the leading countries in these technologies. Some nations, like Australia⁹ and Canada,¹⁰ already have national technology lists of priorities — aggregation and deconfliction across these lists can be a start. Coordinating democratic leadership in international organizations, like standards setting bodies, can be another initial function.
• An allied “DemTech Bank.” The new era of tech competition requires new institutions for the United States and its allies to align our efforts, resources, and values. The PRC recognized this early on and created its Asian Infrastructure Investment Bank to challenge the Washington Consensus.¹¹ A “DemTech Bank” can serve as a counterpoint, pooling allied resources to invest in and support an alliance infrastructure and digital freedom agenda. An initial step could be for allied development finance institutions or export credit agencies to explore co-financing of specific digital infrastructure projects.

Pillar 2: Aligning the Private Sector with Strategic Technology Priorities

Technology companies today manage and secure critical public systems, underpin economies by providing the digital scaffolding for other industries’ operations, facilitate the flow of information, and serve as global platforms of services. The reach and responsibility of tech platforms now match, and in some cases exceed, those of nation states. Building on the discussion in Chapter 1 of this report on the importance of public-private cooperation for technology advantage, how nations can channel the power of their tech companies is now an essential element of statecraft for geopolitics, for shaping the international order, and in the underlying systemic competition between open societies and closed systems.

• Signal strategic technology interests where the United States and its allies want to incentivize – or prohibit – private sector investment and activity overseas. For instance, building on the discussion of techno-industrial strategy in Chapter 2 of this report, the United States and its allies need to coordinate and deconflict strategies and policies around the tech sectors where we want greater private sector focus domestically (e.g. semiconductors and subsidies), to maximize the collective return on our investments, and similarly coordinate restrictions on outbound investments in sensitive tech sectors.
• Establish democratic guardrails for our private sector’s activity at home and abroad, such as around AI governance discussed in Chapter 3 of this report, including on the use of technology and on an approach to data privacy and security that preserves data flows across our ecosystems.
• Coordinate governance and regulatory frameworks, building on recommendations in Chapter 2 to develop a national data strategy and in Chapter 3 on AI development, to ensure the United States, its allies, and our companies can double down on a common ecosystem, standards, and market for tech innovation and development, rather than fracturing them.

Two areas should continue to be prioritized:

• Double down on U.S. and allied leadership in international technical standards-setting bodies. Technical standards help determine whether technology develops along a path toward openness and interoperability, or authoritarian-style control. Market-driven and private sector-led tech standards should remain the gold standard. However, more needs to be done at the governmental level to push back against PRC (and to a lesser extent, Russian) attempts to unduly influence outcomes in traditionally-independent expert bodies that would bake top-down control, under the guise of cybersecurity, and restrictions on open data flow into Internet technologies.¹² The United States and allies should continue to promote our leadership in international standards-setting bodies, including by lowering the barriers to participation by U.S.-based researchers and supporting allied candidates for leadership and other key positions.
• Support the free flow of data for digital trade. Elements of the U.S.-Mexico-Canada Agreement and the U.S.-Japan Digital Trade Agreement provide a model for the free flow of data as a driver of economic prosperity through greater private sector access across digital markets. This also builds on the “Data Free Flow with Trust” (DFFT) concept championed by the late former Prime Minister of Japan, Shinzo Abe, during Japan’s G20 presidency, whereby DFFT principles would enable cross-border data flows to bolster digital trade and power economic growth.¹³ Efforts against data localization can also bolster the normative digital freedom agenda, a foreign policy objective presented in this chapter.¹⁴

Pillar 3: Foreign Policy Organization, Tools, and Workforce: A “Goldwater-Nichols” for Foreign Policy

The global scale and scope of objectives and strategy for the tech competition require a comprehensive review to align the array of foreign policy authorities, organizations, programming, funding, and talent across the U.S. Government to ensure it is best positioned to win the tech competition. A review should focus on recommend actions — short and long term — in three areas:

• Streamlining the U.S. Government’s foreign policy functions across departments and agencies to minimize duplication;
• Modernizing the programs, roles, and responsibilities within departments and agencies to reflect strategic technology priorities; and
• Recruiting, training, and retaining a tech-forward workforce that can address global technology challenges and reward technology expertise.

Today’s techno-economic competition demands organizational reform. The foreign policy authorities relevant to the tech competition are spread across multiple departments and agencies (e.g., the Departments of State, Treasury, Defense, Energy, and Commerce, the U.S. Agency for International Development, the U.S. International Development Finance Corporation, etc.). Efforts like the creation of the International Development Finance Corporation (DFC) from the Overseas Private Investment Corporation and the launch of the China and Transformational Exports Program (CTEP) at the Export–Import Bank of the United States (EXIM) position these agencies for the tech competition, but more will need to be done to align their modernized missions with the legacy authorities they wield.¹⁵ “Tech” continues to be seen through the lens of “IT support” rather than on par with geopolitical statecraft.¹⁶ Even then, the public sector remains far behind the private sector in adopting cutting-edge technological capabilities at speed and scale.¹⁷ Foreign policy in particular can benefit from data science and analytics and information analysis that tech capabilities offer to support diplomatic tradecraft.¹⁸ And the U.S. Government’s approach to human capital in the foreign policy and national security workforce remains a hurdle for recruiting and retaining talent in the tech space who can advance the priorities of tech competition.¹⁹

Beyond a review of what a “Goldwater-Nichols” for foreign policy would look like, near-term recommendations to bridge the gap and elevate tech in foreign policy include:

• Establish an Office of Technology Transition Initiatives. Following the dissolution of the Soviet Union,²³ the United States deployed experts to help transitioning nations’ reform efforts and consolidate the nuclear weapons stockpile of the former Soviet Union. The United States government needs to again be able to deploy overseas a cadre of experts, this time in tech, to advise partner governments on network infrastructure, cybersecurity, and digital freedom. Following the model of the U.S. Agency for International Development (USAID’s) Office of Transition Initiatives, an Office of Technology Transition Initiatives can be created in the Department of State or USAID with authorities to hire and deploy technical talent on overseas assignments.
• Establish a Peace Corps for tech – a Global Tech Corps. While Peace Corps has some programs around science, technology, engineering, and mathematics (STEM),²⁴ a more dedicated Global Tech Corps can send volunteers around the world to help build digital literacy and other STEM competencies in lower income countries. There will be practical challenges for such a mission, but opportunities will exist for Americans to fill gaps in capacity building overseas in technology that support our national interests.
• Increase training, build STEM policy literacy, and create more tech officer positions in the Department of State. The NSCAI also made recommendations along these lines.²⁵ For example, the Department of State offers some technology training modules and academic or fellowship opportunities to build STEM knowledge and experience,²⁶ but more training should be available and required for more officers to strengthen their tech policy expertise in diplomatic tradecraft. Building on the creation of a new Bureau of Cyberspace and Digital Policy, which elevated technology’s importance at the State Department,²⁷ a new dedicated technology officer professional track²⁸ can build the bureaucratic infrastructure necessary to incentivize technology career paths.

Objective 1: Promoting Digital Freedom

The future of the Internet is up for grabs. The PRC, Russia, and others are building a new digital Iron Curtain of “splinternets” and promoting their model abroad.²⁹ Many nations, including democracies and U.S. allies, are being seduced by aspects of closed systems that prioritize surveillance, censorship, and government control of the digital world.

• Build the norms of acceptable practices. The world needs clear baselines for acceptable behavior online in the digital age. The United States and its partners have affirmed that the Internet’s north star remains openness. In the recently launched Declaration for the Future of the Internet (DFI), more than 60 countries signed on to support a digital world that is “open, free, global, interoperable, reliable, and secure.”³⁰ More will need to be done with this type of normative baselining in areas such as freedom of expression online. Nevertheless, such baselining can help shape the decisions nations and companies take as they develop, purchase, and apply emerging technologies.

• Develop a playbook between governments and the private sector on doing business in authoritarian states. A lesson learned from the tech sector’s reactions to Russia’s invasion of Ukraine — including how to navigate tensions between withdrawing services and maintaining connectivity — is to form a common public-private approach for dealing with challenges in authoritarian contexts. The United States and allied governments should participate in multi-stakeholder dialogue with tech firms and civil society groups to develop a playbook – triggers and possible responses – to dealing with pressure from other authoritarian regimes and growing repressive activities elsewhere.
• Invest in, and support, the technological front to reinvigorate digital freedom. The United States should cooperate with allies and the private sector to harness the wave of emerging technologies that hold promise for enhancing privacy, circumventing censorship, and overcoming Internet shutdowns.³¹ Areas to explore include new privacy-centric technologies,³² better virtual private networks (VPNs), and mesh networks and other decentralized solutions for connectivity.³³ Here, the United States and its allies should also use diplomacy to prevent governments from targeting U.S. (and other democratic) platforms through undue restrictions on market access or intimidation.
• Double down on civil society around the world. Foreign assistance and capacity building on digital freedom must prioritize actors who best understand the situation and environment on the ground, i.e., civil society groups operating in their own countries. Investing in their development and building relationships remain essential when it comes to shaping the digital freedom environment.

Objective 2: Safeguarding Global Digital Infrastructure

Digital infrastructure such as wireless networks (especially 5G and its successors), fiber-optic cables (both terrestrial and undersea), operating systems, and servers (cloud and physical) are the foundations upon which digital economies and other technologies function. Control over digital infrastructure confers influence over the data, applications, and platforms of the technology stack. In the hands of authoritarian nations this control becomes coercive political leverage, putting power over information flows into the hands of unaccountable firms responsive to autocrats rather than the rule of law, and creating a technology dependency, similar to energy dependence today, that undermines nations’ economic freedom of action. As a result, the PRC’s pervasive global footprint in digital infrastructure sectors creates security, economic, ideological, and sovereignty challenges for nations that rely on its technology. Its Digital Silk Road (DSR) offers an appealing bundle of technology that includes 5G, end-to-end connectivity, cloud services, payments architecture, and surveillance solutions.³⁴ At least 16 countries have signed official memorandums of understanding (MOUs) with the PRC authorizing DSR cooperation, and dozens are using PRC digital infrastructure.³⁵

The United States and its allies must support and build resilient, secure, and open global digital infrastructure. Competing at scale against the PRC in these tech sectors will require new mechanisms of alignment across allied governments and the private sector, such as coordinated commercial promotion, pooled financing, and concerted funding for new, alternative technologies.

• Tools, tactics, and goals will need to be calibrated across the different digital infrastructure sectors, depending on the local environment, market, and challenges facing U.S. companies.
• We will need deeper engagement with swing state partners so the United States and its allies can better provide the fit-for-purpose technology bundles (e.g. infrastructure, services, apps) that address practical problems, build partner capacities for governance and economic development, and ultimately create new markets and greater opportunities for cooperation on the basis of respect for principles of openness and interoperability.³⁶
• Heavy U.S. diplomatic attention on 5G networks should expand to account for the fact that PRC’s DSR packages often include a full suite of hardware, services, financing, and other incentives. To better compete against the PRC’s tech packages, we will need an integrated approach around commercial promotion for the export of the full ecosystem of infrastructure, alongside financing, apps, and services. In many areas including cloud services, U.S. companies hold considerable advantages.

Additional actions the United States can take to better compete for global digital infrastructure include:

• Create a “Global Technology Accelerator Center.” A centralized Center, in either the Department of State or Commerce or as a standalone agency, could align responsibilities and people to identify commercial opportunities abroad in digital infrastructure and other technologies. The Center could help structure U.S. or alliance bids for contracts, in partnership with private sector companies, and mobilize financing, commercial promotion, and diplomatic advocacy across the U.S. Government to win deals.
• Expand EXIM’s and DFC’s authorities to finance digital infrastructure deals. As the NSCAI also recommended, expanded authorities for commercial promotion and development finance could allow the United States to better compete abroad for digital infrastructure deals.³⁷ Options can include concessional funding, redefining “made in America”³⁸ to better capture U.S. intellectual property used in allied technology, and enabling U.S. agencies to operate globally, including in higher-income countries.
• Build out digital public goods. Digital public goods (DPGs) and digital public infrastructure (DPI), which rely on open source software, data, models, standards, and content for e-governance and other commercial or consumer uses, offer a novel approach for the United States and allies to cooperate in developing digital solutions for local and national governance at scale and at low cost³⁹ that can be tailored to partners’ needs. This can help create openings for companies from allied countries to provide downstream digital goods and services, particularly in nations where the United States and its allies may not currently be competitive. DPGs’ and DPI’s open source architecture may also help advance the digital freedom agenda.⁴⁰

Objective 3: Engaging the Swing States

Most nations do not seek to be locked in to either U.S. or Chinese technology or ideology. They want low-cost effective technology, and they want to preserve their sovereignty and freedom of action amidst the great power competition. Their choices, however, could tip the scales in the competition.

Engaging swing states requires getting back to diplomatic basics. The United States will need to better tailor its messaging to and engagement with these partners on where our interests converge. The United States will need to explain the new era of tech competition, the new challenges and opportunities that abound, the authoritarian threats to the sovereignty of nations that we face in common, and the value of the technology packages we can offer. Certain nations will be obvious priorities for alliance engagement given the size of their market, their geographic importance, or key resources they provide in the tech competition. However, the global nature of both the competition and networked systems means that the United States will also need an alliance full-court press for positional advantage everywhere by:

• Building a common understanding of how technology and systemic competition are challenging the sovereignty of nations. The nature of the global tech competition, the implications of digital dependence and the importance of digital resilience, remains poorly understood around the world. This is a story that needs to be told in private and in public through capacity building to help partners understand the risks and where the United States and its allies can help provide resilience.
• Exposing the fiction behind the PRC’s Tech Offerings. The PRC’s promise of “common development”⁴¹ and common prosperity under delivers and exposes its partners to security risks. In addition to the threats regarding digital dependence, regular reports of Belt and Road Initiative and DSR projects being delayed or over-budget and facilitating espionage raise questions about China’s ability to deliver on its commitments and its intentions. All of these are opportunities to expose the fiction of what China is selling and tee up practical alternatives that the United States and its allies can offer.

• Toning down the rhetoric around “democracy” and values in the tech competition, and instead put our money where our mouth is. Politically, the colonial legacy of the global north in the global south taints the rhetoric around freedom. Economically, China is the leading trade partner for many nations around the world and “common development” resonates better — rhetorically at least — in some areas of the world than does Western-style “democracy.” The United States and our allies cannot rely on rhetoric to win over partners with good intentions. We need to compete and coordinate on practical alternatives and explain how our technology solutions better address swing state interests in their own resilience and sovereignty.
• Maintaining the open door and increasing people-to-people connections. As noted in the discussion on immigration in Chapter 2 of this report, a key strength for the United States and its allies is the openness and diversity of our societies. We want a diversity of students, scientists, entrepreneurs, and others to continue forming the fabric of a prosperous, diverse, and secure America, regardless of national origin. The United States and its allies will not win the tech competition if we cannot foster sustainable relations with the next generation of innovators and leaders around the world. We should expand, by an order of magnitude, leadership and tech talent exchanges with the swing states, in partnership with allies and the private sector. The United States should also partner with allies to develop joint STEM programming and scholarships to identify, train, and bring untapped talent from the swing states into a global tech workforce.

Objective 4: Constructing a New Relationship with China that Reflects Tech Competition

Defining the acceptable bounds of a technology relationship with the PRC and preserving stability in relations will be central challenges for the United States and its allies. As the United States arrives at a new consensus on what the bounds of a new relationship look like, the most challenging issue for the future may be maintaining predictability and stability in the U.S.-China relationship as they become increasingly disconnected technologically and economically. Both the United States and the PRC are seeking to reduce the linkages between their tech ecosystems, particularly in strategic sectors. The United States⁴³ and some allies, such as Australia,⁴⁴ Canada,⁴⁵ and the UK,⁴⁶ have taken steps to cut ties to PRC entities that pose national security risks and violate human rights. The PRC has prioritized developing its domestic tech industry in order to insulate its economy from external dependencies.⁴⁷ Both sides are trying to protect strengths and compensate for weaknesses in their tech ecosystems with no end of the larger strategic rivalry in sight.

Next Steps to 2025 and Beyond

The alliance approach outlined in this chapter is applicable to competing in any technology sector, and also frames the cooperation the United States can build to advance its priorities in the following chapters on defense and intelligence. Beyond microelectronics, 5G, and AI, the United States and its allies will need to build a common understanding around the challenges and opportunities in biotechnology, quantum computing, future energy systems, and other emerging technologies that are discussed in Chapter 7 of this report. The United States and its allies will need to provide a vision for what a democratic, technology-enabled future looks like in practice and how open societies can use them to offer security, prosperity, sovereignty, and freedom. And we must organize a DemTech Alliance of leading democracies, as well as civil society and private sector partners, that will conduct the research, develop the institutions, build the technologies, and guide their responsible uses to bring about this vision.